The Chang Company Provides a One-Year Warranty on All Merchandise

Short Answer

The Chang Company provides a one-year warranty on all merchandise it sells. In 2013, the company recorded sales of $300,000. It estimated that the warranty costs on these sales would amount to $3,000. In July 2014, Chang paid $150 to satisfy a warranty claim. Indicate whether each of the following statements is true or false.
_____ a) Chang's adjusting entry recording warranties at the end of 2013 reduced total assets and total equity.
_____ b) Chang's adjusting entry recording the warranties at the end of 2013 increased Chang's total liabilities.
_____ c) The July 2014 entry reduced total assets and net income for 2014.
_____ d) The July 2014 entry reduced Chang's total liabilities.
_____ e) The adjusting entry recorded at the end of 2013 decreased Chang's revenue for the year.